As Expected, Aereo Pleads Its Case For Survival

from the cable-company dept

Aereo is back in a district court trying its "okay, fine, you say we look like a duck, we'll act like a duck" explanation so that it can stay in business and pay the statutory rates for a cable company. As you hopefully know by now, this is in response to the Supreme Court's "you're a cable company!" ruling. The broadcasters, of course, just want Aereo to die, so they claim that even if the Supreme Court declared it a cable company, the company still can't pay statutory rates. Aereo tried to skip the district court and go straight to the appeals court, but that attempt was (probably rightfully) rejected recently, so now it's back at the district court, once again making the case for it being a cable company.

Its key argument is, basically that, during oral arguments, Justice Sotomayor more or less said if the Court finds Aereo to be a cable company, then it could just pay Section 111 statutory fees and be legal.

JUSTICE SOTOMAYOR: . . . But I look at the definition of a cable company,
and it seems to fit. . . . [Aereo] [m]akes secondary transmissions by wires, cables,
or other communication channels. It seems to me that a little antenna with a dime
fits that definition. To subscribing members of the public who pay for such
service. I mean, I read it and I say, why aren't they a cable company?

MR. CLEMENT: Well, Justice Sotomayor, a couple of things. First of all, I
mean, I think if you're—if you’re already at that point, you’ve probably
understood that just like a cable company, they’re public—they’re publicly
performing and maybe they qualify as a cable company and maybe they could
qualify for the compulsory license that's available to cable companies under
Section 111 of the statute.

JUSTICE SOTOMAYOR: But it just gets it mixed up. Do we have to go to all
of those other questions if we find that they’re a cable company? We say they’re
a c[]able company, they get the compulsory license.

At the time, most folks kinda wondered why Sotomayor was going off on this tangent, rather than on the key issues related to the case, concerning the public performance right. What people didn't expect was that the Court would come up with its wacky "looks like a duck" test. But since it did, it certainly seemed to imply that Aereo could just get the compulsory license -- which it's now seeking to do. The company further argues that Justice Breyer, who authored the majority decision, fretted during oral arguments that it would be problematic if Aereo were not allowed to get a compulsory license:

JUSTICE BREYER: Once you take them out of the compulsory licensing
system, they're going to have to find copyright owners, who owns James Agee's
pictures? Who owns something that was written by—like a French silent film in
1915? I mean, the problem is that they might want to have perfectly good things
that people want to watch and they can't find out how to get permission. That is a
problem that worries me and it worries me again once you kick them out of the
other systems.

Aereo also counters the broadcasters argument that the ivi ruling says that online streaming services can't qualify as cable companies for statutory rates doesn't apply here. Earlier, Aereo argued that the Supreme Court ruling effectively overturned the ivi ruling -- an argument that makes a lot of sense. But here, Aereo goes even further, noting some key differences between ivi and Aereo, including a pretty big one: ivi was "geographically unbounded." That was a key part of why ivi lost, and Aereo notes that its service is different, in that it offered a geographically-specific service.

First, the technology at issue in ivi involved geographically unbounded transmissions,
which the Second Circuit noted was “vastly different” from the technology in Fortnightly and
Teleprompter.... By contrast, the Supreme
Court found that, with respect to “Watch Now,” Aereo is “overwhelming[ly] like[]” and “highly
similar” to the technology in Fortnightly and Teleprompter.... As a result, this case is factually distinguishable from ivi on the very point that drove the
Second Circuit’s decision. Indeed, the unrestricted nature of ivi’s transmissions was the
determinative fact for the Second Circuit, which noted that Section 111’s compulsory license
scheme was intended to support local market—rather than national market—systems.... As a result, the court found that ivi’s nationwide retransmission did not seek to
address the important issues of availability of local over-the-air television signals, and it was
therefore not the type of service Congress intended the compulsory license to cover....
Because Aereo’s “Watch Now” technology does not give its subscribers access to broadcasts
outside of their home DMA, and instead gives only geographically-restricted access (with and
through corresponding local physical antenna facilities), and because (as the Supreme Court
found) the technology is “virtually identical” to the technology Congress addressed in the 1976
Amendments, Aereo’s “Watch Now” technology is not governed by ivi.

Aereo makes another interesting argument for survival as well. Even if it doesn't qualify for Section 111 compulsory rates, it should still be allowed to keep its "Watch Now" feature working, because of the DMCA. Basically, it's saying that even if the DVR functionality is deemed infringing, it has a stronger argument around the live streaming, based on the DMCA. All the parenthetical quotes supporting this are from the Supreme Court's ruling...

If the Court concludes that Aereo is not entitled to a Section 111 license, a preliminary
injunction should still not enter because Aereo is entitled to the 17 U.S.C. § 512(a) [DMCA] safe harbor
because its “Watch Now” function is a “transitory digital network communication.” Each of the
Section 512(a) elements is satisfied and undisputed. First, the transmissions of the material are
initiated by or at the direction of a person other than Aereo.... (“Aereo’s system remains inert until a subscriber indicates that she wants to watch a
program.”). Second, the transmission, routing, and storage of material are carried out through an
automatic process, without selection of the material by Aereo.... (“in automatic response to the subscriber’s request”); ... (agreeing with dissent that Aereo does not “select” the content). Third, Aereo does not select the recipients of the material,
except as an automated response to the user.... (“When an
Aereo subscriber selects a program to watch, Aereo streams the program over the Internet to that
subscriber.”). Fourth, no copy of the material transmitted is made accessible to anyone but the
user who made it, and no “Watch Now” copy is kept for a longer period than is reasonably
necessary.... (“It streams the content of the copy to the
same subscriber and to no one else.”); ... (“If the user does not press ‘Record’
before the program ends, the copy of the program created for and used to transmit the program to
the user is automatically deleted when it has finished playing.”);... (“The file saved
to the hard disk using the ‘Watch [Now]’ function is not automatically retained unless the user
clicks ‘Record’ while the show is still open on the user’s web browser.”). Fifth, the material is
transmitted without modification of its content....

As a result of satisfying this safe harbor provision, Aereo cannot be liable for the claimed
“public performance” of Plaintiffs’ claimed copyrighted works. And, Plaintiffs’ requested
preliminary injunction cannot be entered because it is outside the scope of a permitted injunction
under the DMCA.

That could lead to some interesting legal questions going forward.

Finally, Aereo argues that no injunction is necessary, because there's no evidence of "irreparable harm." Here it probably hurts that CBS and other networks more or less admitted that even if Aereo had won the "harm" would be minimal.

The Section 111 arguments about whether or not it's a cable company will continue to make the headlines, but the DMCA argument here may be the most interesting one of all (and one that the broadcasters will most freak out about).

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Certain defenses are waived if not raised early in the litigation. I don't think 111 or 512 would be waived, but I do suspect Aereo would have to amend its answer in order to raise them now--assuming it didn't raise them in its prior answer. I'm not exactly sure how it works, though. Any Civ Pro wonks in the house?

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...It's not a defense. IT's literally a direct attempt to remain legal under the law. How the hell that can be considered to be against the law requires logic so tortured it should be banned under Geneva as Stupidity of Mass Destruction.

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Sections 111 (statutory licenses for cable systems) and 512 (DMCA safe harbors for service providers) both operate as defenses. The plaintiff shows that the defendant did something that on its face violates the plaintiff's rights, and then the defendant shows that some defense excuses the violation. Here, the Supreme Court said that Aereo on its face violates the plaintiff's public performance rights. The burden then shifts to Aereo to show that some defense excuses the violation. Aereo can win by showing that it has a defense, such as a license under 111 or a safe harbor under 512.

It's important too to realize that the Supreme Court never ruled that Aereo is a "cable system" under 111. Nor did it say that it's not. The issue of whether Aereo is "cable system" under 111 was simply not before the Court. So Aereo is not agreeing with the Court when it argues that it's a "cable system." To borrow Mike's terms, the Court said Aereo quacks like a duck, but it didn't say Aereo is a duck.

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Just FYI, to rational people, your argument looks like: "I realize this is insane from all angles, but it's not level 10 insanity, it's only level 9 insanity, maybe 9.5 at worst."

Lately, the Supreme Court has made it a habit to make rulings so narrow that they give no guidance to anyone on what the law actually is. Face it, they screwed up on this one, because they didn't answer any of the fundamental questions of why what Aereo was doing was not permitted under the law.

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I disagree. I think the Court brought some much needed clarity to the public performance right, and by extension, to the distribution and display rights. Now we know what "to the public" means, definitively.

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And their definition is completely insane. One signal, to one person, does not a 'public performance' make, yet that's what they are claiming here, despite there being nothing 'public' about the transmission other than that it's going over the internet.

Using that definition of 'public performance', a file-locker or similar service that allowed someone to stream and listen to their own music could be argued to be a 'public performance', and required to pay the related fees.

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"Public performance" definitions have never really been short of anything but batshit crazy.

The status quo is that if you can be proven to be in possession of a radio or television set - regardless of where it is, whether it's powered on, whether anyone at any point in time is actually listening or watching - it counts as a public performance, and unless you pay the industry is irreparably ruined.

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IANAL, but as far as I can tell, this is now NEW litigation. They were sued by the networks, appealed all the way up to the Supreme Court, and the networks won.

Now Aero has initiated a new round of litigation, a new and separate 'case'. I don't believe it is a continuation of the previous litigation (from a 'this case' or legal perspective, but it is still part of an 'ongoing litigation strategy'), therefore they are new free to embrace new legal arguments as it's a new case.

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IANAL, but as far as I can tell, this is now NEW litigation. They were sued by the networks, appealed all the way up to the Supreme Court, and the networks won.

Now Aero has initiated a new round of litigation, a new and separate 'case'. I don't believe it is a continuation of the previous litigation (from a 'this case' or legal perspective, but it is still part of an 'ongoing litigation strategy'), therefore they are new free to embrace new legal arguments as it's a new case.

No, it doesn't work like that. Once you sue somebody and lose, you can't sue them again over the same underlying issue. So it's still the same litigation. The thing that got appealed to the Supreme Court was just part of a pretrial motion for a preliminary injunction. That motion is now back before the district court, which is what the parties are arguing about now. The Supreme Court didn't say whether the injunction should be issued. It just said that the district court and Second Circuit were wrong about how the public performance right works.

Aereo is attempting to borrow elements from Column A, Column B and Column C and trying to claim that it's a cable company by borrowing ideas from every column in order to come up with something entirely different.

Online streaming services cannot claim they are a cable company because that's not how cable companies work as cable companies have to pay for transmission rights from the studios who own that content.

And Aereo has tried to get away with not paying for transmission rights. I just don't see Aereo willing to pay anything for any content they want to stream. They're trying get something for nothing and that's not how the cable business works.

Additionally, reclassifying itself as a cable company without paying for retransmission rights. It's a joke because Aereo doesn't want to pay for that content. It's like a torrent site deciding to reclassify itself as a cable service. It doesn't pass the laugh test.

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When one of those 'Columns' is a Supreme Court justice, one of those that, using the 'looks like a duck' test found them to be 'like' a cable company, and needing to follow the same restrictions, I think that carries just a titch of weight, even if you don't want it to.

JUSTICE SOTOMAYOR: . . . But I look at the definition of a cable company, and it seems to fit. . . . [Aereo] [m]akes secondary transmissions by wires, cables, or other communication channels. It seems to me that a little antenna with a dime fits that definition. To subscribing members of the public who pay for such service. I mean, I read it and I say, why aren't they a cable company?

JUSTICE SOTOMAYOR: But it just gets it mixed up. Do we have to go to all of those other questions if we find that they’re a cable company? We say they’re a c[]able company, they get the compulsory license.

So which is it? Are they a cable company, and eligible for the compulsory licensing, yet bound under the cable restrictions, or aren't they, in which case they aren't bound by the cable restrictions?

As for your insisting on the strawman that they just want it all for free, and have no intention of paying for the compulsory rates, if you had actually read the article you'd know that such a claim is hogwash, they are fighting to be able to pay those rates.

Regarding why they didn't pay retransmission fees in the past, maybe that has something to do with not thinking that one signal, going to one person, counts as a 're-transmission', which would be one signal, going to many people. They didn't pay because they didn't believe they had to, simple as that.

Look, just admit it already, you want it both ways. You want them to be enough 'like' a cable company that they have to follow the same laws and restrictions, but not enough that they actually can act like a cable company(and not so incidentally provide competition to the current cable companies), and get treated like one when it comes to the upsides, like compulsory licensing rates.

Your an idiot Kenichi

Aereo is willing to pay retransmission rights, the broadcasters wont let them, thus they are in court. They have been classified as a cable company by the supreme court so they are just trying to get the corrupt district court to rule that the supreme court precedent stands. The corrupt district court is trying to find a way around the supreme courts "looks like a duck test" as they are in the pockets of broadcasters. Justice in America is not availiable often.

Re: Your an idiot Kenichi

They have been classified as a cable company by the supreme court

Incorrect. Their operation is as a cable company, but they have not been granted license, nor did the supreme court rule that they must be licensed. They cannot agree to pay the copyright retransmission fees as a cable operator until they have achieved that status with the FCC, which is seems Aereo does not want to do.

Aereo built their business model on trying to dodge around the rules, and instead of found themselves squeezed by the same. They need to get out of court and get back to the simple concept of working with what they have to make a viable, legal business model.

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Really though, you could say the same thing about any given mega Corp putting "headquarters" somewhere with lenient tax laws. They have built their business models around dodging around the rules too. And it's all totally legal until it's not

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It's all legit until the courts rule against you, which is EXACTLY what happened to Aereo. They danced and dodges and spun around, and hit a legal brick wall. Now with their way forward through the gap blocked by a solid court judgement, they are forced to argue less and less impressive positions.

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Aereo tried to "complay" with a combination of the laws as written, court judgements, and a (mistaken) belief that a whole rack of antennas wouldn't add up to being a cable operator. SCOTUS quite rightly looked at what they were doing and pretty much said "that dodge doesn't work". Remove the one antenna one user razzle dazzle, and they have nothing more than a business that has been repeatedly shut down in the past.

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Which is why they won every case up to the Supreme Court?

Why do you hate the Free Market?

Aereo are trying to provide a service following Whatever Idiocies the law requires, yet they are being penalised for trying to follow the law. They are trying to maximise user benefit and make a profit, like any good company should. Except for all the companies that you support, which are all apparently about turning the quickest buck while screwing over users and creators.

This is censorship and destruction of disruptive innovation by corrupt law, plain and simple. If it were a genuine attempt to stop someone 'freeloading' then they would be happy to have Aereo compete while offering statutory fees. But it's not about that, it's about preventing Aereo offering a better service than anyone else can be bothered to do.

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Nope. They tried to play around by at each point taking steps to try to avoid being subject to the rules. They attempting to create a technology kludge that would sneak them past the "cable" barrier, and then to shake it off right after to get all of the benefits without any of the responsibilities. As someone else said, it's like selecting only the parts from column A, some from column B, and some from column C while never acceptable any of the responsibilities that come with any of them.

Cable company? You need an FCC license, and you may be bound to provide community program or otherwise fund related services. There may also be mandatory carriage restrictions or requirements to provide services to disabled or other groups. They would be required to pay the copyright fees that other cable companies would be subject to.

Streaming company? You don't need a license, but you cannot re-transmit over the air programming directly. They would also be required to license and pay appropriate fees for using the content, which are generally much higher than cable companies.

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Many business do it to some degree, but most of them don't base their entire business model on it. Aereo was trying way too much of a dodge ("Look! millions of tiny little antennas!") and SCOTUS pretty much told them to pound sand.

The other difference is many companies will push the rules a bit, accepting that they may have to slightly modify things to comply in the end, maybe like a 10% change. Aereo was all or nothing. Their business model worked only if the courts agreed that somehow directly distributing OTA TV wasn't going to make them subject to copyright law, because "millions of tiny little antennas!". That failing means that their entire business is basically gone.

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I look forward to seeing you railing at the content dealing/peddling companies for screwing over artists and actors, because 'the law' is that they should be fairly compensated, and MAFIAA shouldn't be 'dodging tax law' by using 'Hollywood' accounting.

Aereo has never agreed to pay for any transmission fees, which is what the cable broadcasters wanted them to do. Aereo stuck their noses up at the cable industry and thought that since it was being broadcasted over free spectrum that they could capture and retransmit that content without paying for it.

Aereo did nothing but stick its nose up in the air to those who owned that content. ABC, CBS, NBC ... they wanted payment from Aereo for retransmitting that content but Aereo refused to compensate those networks.

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Ah ha ha, ah ha ha, ah ha...

Sounds to me the only one who needs to get his facts straight around here is you. That's not even touching on the fact you're not even trying to back up anything you're saying at all. You're just bashing your head against a wall hoping you'll shut people up with the spectacle, and are basically repeating yourself in hopes to annoy people in agreement or silence.

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You are correct. However, you miss the point.

The copyright office won't give them license because they are NOT a licensed and legal cable service. Without that important step, the license itself would be meaningless, similar to getting a license plate for a bicycle and putting it on a big rig. It might look nice, but it's not legally correct.

At the point that Aereo obtains a license from the FCC to operate their cable system, then they will be able to obtain license. Otherwise, they are just once again trying to short cut the system and are failing.

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Response to: kenichi tanaka on Aug 29th, 2014 @ 9:27pm

You are correct in that that was aereo's initial position which had a fairly sound basis in case law. NOW since the supreme court decision, they are arguing that they should be allowed to PAY the (lower) compulsory rates enjoyed by cable companies as opposed to the arbitrarily gouged internet streaming rates.

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First, cable broadcast companies aren't even involved here. It's the OTA broadcast companies that are. Second, they never wanted them to pay the fees. They want to create a legal purgatory where by the word "compulsory" has no meaning in the law such that a license is only granted when they wanted granted and to whom they want it granted.

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They want to prevent the Internet becoming a major means of delivering their content, as that leads to increased demand for play on demand, and that will kill their broadcast business. The OTA companies are the buggy whip makers in an era where content delivery is changing from broadcast to on demand.

The argument by Justice Breyer explains quite well why copyright should not last so long. What's the point of having a right to collect royalties a century later if no one can find who to pay? Or even 90 years after you're dead? Sure, it's easy if you have a long standing reputation like Hitchcock or Sir Arthur Conan Doyle, but the vast majority of creators do not. In fact, the last time copyright was extended, only 3% of the eligible works would even benefit from it! Creators certainly would like to dream they will be that famous, or at least make it into that marginal 3%, but the stark reality is that very few ever will. Instead, we're stuck where everyone's afraid of even touching a century old work because someone might sue, simply because they too want to retain the right to sue everyone--in the off chance they become famous someday.

Not necessarily easy

> Sure, it's easy if you have a long standing reputation> like Hitchcock or Sir Arthur Conan Doyle

I see no reason this would necessarily mean it would be easy; one could easily be in the situation of having to traverse a large tree of estate administrations, since the post-mortum extension period could be several generations long...

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At least in that case there is usually someone advertising themselves as owning the rights (even if their ownership is less than fully established), whereas for someone obscure even the rights holder probably isn't really thinking about it.

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With old works it may be possible to trace the authors decedents, but these usually only have a right to receive royalties. The actual copyright holder can be much harder to trace through business failures, mergers, and breakups, where the relevant documentation is long lost.

what is so ridiculous is that the various courts are finding, so far, what Aereo isn't. that's fine, but it is definitely SOMETHING. THEREFORE, instead of continuously saying what Aereo isn't, why dont they decide what it actually is, under the law at least? it's all very well that judges can keep fucking about with various definitions of something, when they dont understand what a particular thing actually is, but they ignore, i think, that they also hold advances in services and technology in their hands too. to continuously stop something or make out it is something different, they are withholding progress and keeping the old guard in place. that is not good!!

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What makes absolutely no sense at all here is why aren't the networks already doing this themselves? For a comparison, look at radio. Clear Channel owns the largest share of terrestrial radio stations nation wide. They have embraced streaming technology full force with their iHeartRadio platform even without geographical restrictions and it's been a huge success. Other stations do the same on an individual basis. They are not subject to this sort of disruption because they fill the void themselves instead of leaving it open for someone else. If they had taken all the money they spent fighting Aereo and others in court, and instead spent it on building and marketing their own streaming platform, they would be making money from it instead of wasting it.

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That's easy it's one of two things:

1-Follow the moneyThey want to push people to whichever model makes the most money for them. Apparently that is NOT Aereo's model. OR someone else further up the food chain is threatening to pull content if Aereo is allowed to do this...sound like anyone?

2-ControlThey think somehow they lose control. I guess when your business model is to bully people into signing away their rights (like so many of the distributors of IP), then you are wary of anyone between you and the cash... I mean customers.

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Radio and TV are two very different animals.

TV works on a local affiliate system where the network licenses local stations to air the content it creates. A conglomerate like Clear Channel does not produce the amount of content that a TV netowrk does nor does it make the money a TV network does in affiliate rebroadcast fees.

While the casual radio listener *IS* a Clear Channel customer the casual TV viewer is not an NBC/ABC/CBS/Etc customer, the local station is the customer and the viewer is a customer of the local station. Or a product to be sold access to depending on how pedantic you want to be.

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The structural differences do not matter. The retransmission fees would still be there as well when the apps that stream the content are developed by the networks and provided as a platform for the local affiliates to join as they would be able to control what devices were compatible with the app.

It's not being pedantic. In both cases with broadcast OTA content the viewer/listener is not the customer but rather the product.

While it might seem like the music industry is today the most forward-looking, progressively-minded, and technology-embracing branch of Big Media, recent history shows a much different story. For years the record industry fiercely resisted the very idea of digital downloads, internet radio, and music streaming.

Let's not forget that Big Music fought a multi-decade-long scorched-earth war against basically "technology" - winning every battle yet losing the war - until finally agreeing to work with modern technology, rather than continuing to keep fighting it while entrenched within their obsolete business models.

Even then, it was a few big established companies who ended up getting the best deals (and the lion's share of the digital market), as many of the small companies who tried working out deals with the record industry were forced to shut down.

While the music industry may appear years ahead in the digital realm, it's really only because the legal battles were fought years earlier.

DMCA Bites

Completely legal in Asia

I don't see what the big deal is, Softbank provides us with a similar service here in Japan and throughout SE Asia. Why doesn't Aereo sell their service to Sprint? Masayoshi Son has been looking for a way to get into the cable/broadcasting business in the US-he's already got these services in the rest of the world and the first thing he'd do once he's got Aereo is start a price war with Time Warner.

Storm in a Teacup

Although I hope Aereo wins, I don't have much hope for them.Honestly, it doesn't really matter.

The best strategy to take with the major broadcasters is to ignore them.

That is working wonderfully for the newpaper industry, right now. Ignore them and they will inevitably go away.

They can win all the battles they want, and lose the war due to their market dying off (literally, the people who still watch broadcast TV and read newspapers are all over 50 now).

What is interesting to me though, is a future battle - Cable TV vs The Internet, especially since Cable companies provide most of the Internet access in the US. That one is the one to pay attention to.

2) On Demand over the internet?

Where does Comcast's On Demand rebroadcasting of over-the-air networks' copyrighted material fall in the scheme of things? Seems to be very much like Aereo's time shifting. Of course, Comcast pays the compulsory copyright fee, but a lot of the distinction between a cable company and aereo has been that aereo sends data over the internet. But Comcast is doing the same thing. I don't think that just saying sending data over the internet is the deciding factor. Seems to me that if the system (courts & legislation) has determined that aereo is retransmitting in the sense that cable companies do, then they should probably be treated similarly to cable companies when paying for the rights to retransmit.